Inside one of the squat buildings that make up Research In Motion Ltd.’s sprawling headquarters in Waterloo, Ont., Kyle Dorcas is holding up a sleek, black and grey BlackBerry designed to sell mainly outside a radius of several thousand kilometres from its home base.
Mr. Dorcas is the lead product manager for the BlackBerry Bold 9790, a cheaper, smaller version of the Bold 9900 that RIM has just begun selling in its most important markets, such as the United States and Europe. On the table in front of him is a second phone, a touch screen device called the Curve 9380. It, too, is merely a less-expensive version of a high-end device that the company launched in August.
While these devices will eventually go on sale in the U.S., RIM’s biggest market, they were engineered and designed with emerging markets in mind. For the first time, RIM is rolling out a global device starting in an overseas market – with Mr. Dorcas’s new Bold going on sale Nov. 26 in Indonesia, one of the BlackBerry maker’s most successful overseas markets.
“There is a large segment of the world that wants these capabilities, but in a smaller [device]” Mr. Dorcas says, as he holds the slimmer version of the Bold. “One size does not fit all, around the world.”
For RIM, increasingly, the future lies abroad. The company has seen its market share in the United States plunge to just 9 per cent from more than 60 per cent a couple of years before. But in places such as Africa, BlackBerry use is exploding: RIM saw shipments of its devices grow 741 per cent, year over year, according to research firm Canalys.
RIM’s domination of these emerging markets is a result of its huge start; it has faced little real competition in smartphones in developing economies. But that’s starting to change.
Devices running Google Inc.’s Android operating system and Apple Inc.’s iPhone are assaulting RIM’s profitable stronghold. In the last quarter, Android and its various handset manufacturer partners accounted for an astonishing 52.5 per cent of all global smartphone sales, according to research analysts Gartner Inc., while Apple Inc. was at 15 per cent and RIM was reduced to only 11 per cent.
In an interview, Patrick Spence, RIM’s London-based managing director for global sales and regional marketing, said the company will continue to dominate in these markets by relying on its popular BlackBerry Messenger (BBM) platform – beloved because it’s virtually free and is more interactive than simple SMS texts – by continuing to tailor its marketing approach to each country, and by leveraging local software developers.
Mr. Spence also defended the company’s strategy amid recent missteps, and tossed a few barbs at the company’s rivals. He said the success of Google Inc.’s Android operating system is simply a result of global smartphone growth generally and that RIM will continue to expand globally.
“What we’re doing is staying focused on where our strengths are, in terms of our solution and what it is that got us to 70 million [BlackBerry users]– and then enhancing that,” Mr. Spence said. “The whole market is going smartphones, that’s why you’ve probably seen the growth numbers you have …I’m comfortable in terms of where we are and how we can compete.”
Unlike Apple, which only offers the iPhone, RIM’s executives point out that its numerous devices allow it to customize the BlackBerry brand to specific markets. In South Africa, for instance, Mr. Spence says marketers have turned it into a trendy youth brand by targeting spoken word poetry events and university campuses. Andrew Bocking, RIM’s vice-president of handheld software, notes that when sold in Britain, the company’s PlayBook tablet – which has not sold well, and is being heavily discounted – comes preloaded with BBC’s iPlayer.
The company also experimented by partnering with Porsche to design a $2000, steel-and-leather device that launched in the Middle East, where the BlackBerry is considered a luxury brand.
The past year, though, has been brutal as RIM disappointed investors with product and software delays, earnings misses, and the PlayBook, which many thought was rushed to market.
However, throughout the turmoil, RIM has continued to make inroads overseas: In the last quarter, $2.33-billion (U.S.) of the company’s revenue – 56 per cent – came from international markets outside Western Europe, Canada and the United States, compared with only $1.6-billion a year earlier and only $431-million or 26 per cent in the third quarter of 2008.
But data from research firm IDC reveals that RIM’s market share is shrinking almost everywhere except the Middle East. In Latin America, where RIM is by far No. 1, its share of smartphone shipments has fallen from 41 per cent in third quarter of last year to 35 per cent in the last quarter, while both Apple and Samsung gained.
Mr. Spence says RIM will hang on to international growth through the scale of BBM’s 50 million global users, despite Android and Apple both having comparable instant messaging services now.
“You’re seeing an evolution of BBM that will keep us ahead of some of the instant messaging services that have come out to try and copy the essence of BBM,” Mr. Spence said, citing BBM Music, a recently launched service that allows BlackBerry users to share songs.
But RIM is not the only one with momentum. Android’s vice-president of engineering, Hiroshi Lockheimer, said that Google’s phenomenal mobile growth has come through original equipment manufacturers (OEMs), such as Samsung, being able to customize the software to suit any regional market they want – a strategy similar to RIM’s.
“It becomes this network effect,” Mr. Lockheimer said. “These OEMs can decide where their strengths are, what countries they want to target and how they want to target those countries – and just go. And that’s how you end up with the growth that we’ve seen.”
Kevin Restivo, a senior analyst with IDC, said even as RIM finds success in markets such as Indonesia, the brand is struggling to gain traction in other key markets, such as China, where RIM is not even one of the top 10 smartphone brands.
China has “been a tough nut to crack,” concedes John Yen, who works in product marketing for BlackBerry’s Bold franchise.
Mr. Spence, though, expects that as international expansion continues, U.S. market share will bounce back. Verizon Communications Inc. and AT&T Inc. have only recently pushed RIM’s newest devices. “Now we’re in a position where we’ve got the new products, the new experience into the United States,” Mr. Spence said. “It’s important for us to make sure that we’re helping people understand that the BlackBerry story has evolved.”